25th May 2018
IMF Suspends $224M Election Funds for President Koroma's Corrupt APC!
By a press release (01/02/18)
President Ernest Koroma's APC is paying heavy price for the rampant corruption in the APC government as IMF unleashes sucker punch!
The International Monetary Fund IMF has suspended elections funds as the APC government is spending IMF money to win March 7, elections. IMF sources say the suspension is due to the fact that the ruling APC government continues to contravene a gentleman agreement between the IMF and Sierra Leone government to use the IMF funds for economic recovery alone, nothing more and nothing less. (Photo: IMF boss Christine Magdalene Lingarde very upset with the APC government).
A confidential despatch by United States diplomats in Freetown has laid bare the cause of strained relations between President Ernest Bai Koroma's government and the International Monetary Fund. The cable also voices what Sierra Leone's international partners really think about its prospects for economic reform.
The IMF suspended disbursements of the four-year Extended Credit Facility (ECF) in December, citing delinquency, according to the US State Department cable to Washington. Other major donors, including the European Union, have similarly withheld budgetary support and are channelling aid to distinct projects instead, according to the cable, exclusively obtained by Africa Confidential.
The country goes to the polls on 7 March. Whichever of the five presidential contestants is victorious will inherit an economy in severe straits, the IMF says. President Koroma launched his 'agenda for prosperity' five years ago, promising to take Sierra Leone towards middle-income status.
The cable was despatched after embassy staff met the IMF Resident Representative in Freetown, Iyabo Masha, in November. Due to the sensitivity surrounding discussions of the economy in an election season, the IMF has declined to make any public statement on the suspension of funds.
The withheld funds are part of a four-year, $224.4 million package, negotiated in June 2017, to assist Sierra Leone to offset balance-of-payments shortfalls, control inflation and build foreign reserves. The agreement governing the use of the money required Koroma's government to increase domestic revenue by collecting market-rate royalties on Sierra Leone's mineral exports, eliminating 'discretionary waivers' of import taxes on multiple goods and services, and imposing a 20% import tax on imported vehicles worth more than $25,000.
The deal also committed the government to removing subsidies on rice and on fuel by allowing petroleum products to be taxed at real market values. Both subsidies are potentially politically explosive.
The IMF made its first ECF disbursement, of $54.3 million immediately after the agreement in June. In October, Koroma chose his Foreign Minister, Dr. Samura Kamara, as his preferred successor and the presidential candidate for his All People's Congress (APC), setting Sierra Leone in campaign mode (AC Vol 58 No 22, One man, one vote).
At that point, the cable says, the government told the Fund that it was not going to implement the revenue improvement measures or the cuts in subsidies because they would damage the governing APC's chances of re-election.
Instead, Koroma's Minister of Finance and Economic Development, Momodu Kargbo, submitted to parliament on 17 October a populist budget including subsidies for school fees and college tuition, as well as funds for teaching materials in schools and universities. The APC sees this as a deft move because the education sector is where Koroma's government has faced sustained criticism, suffering persistent strikes by university lecturers over salaries and even, at one point, having to suspend exams at the once-prestigious Fourah Bay College because of a lack of stationery.
In fact, according to the US cable, Koroma's government is yet to pay millions of dollars in salary arrears to public employees such as schoolteachers, lecturers, and airport security workers. However, parliament, which the APC dominates, blackmailed the government, saying it would not pass the budget until overdue gratuities for MPs worth $3.6 million were paid. The government was desperate to get the budget through parliament and it gave in. Koroma signed off on a part payment coupled with assurances and the MPs passed the budget. The new budget also promises more funding for the electricity sector, another populist platform on which Koroma stood in 2007, when he won his first presidential election.
The government's promise on electricity supply repeats an old vow: to improve transmission and distribution networks to meet the needs of households, businesses and industry. Officials hinted early this month that the government has contracted a Turkish company to start providing 300 megawatts to the grid in February, a month before polling day. The cable says, however, that not all the necessary agreements are in place. Only the project to increase the capacity of the Bumbuna hydropower facility from 50 to 80 megawatts is going forward.
Freetown still has only intermittent electricity, like other towns. The exception is Koroma's home town of Makeni, which benefits from a Chinese grant that ensures non-stop power supply (AC Vol 57 No 20, Iron Man & Vol 58 No 8, Runway overrun). The budget also touts plans to invest in clean water by introducing bulk supply schemes and building wastewater infrastructure.
The cable reports that the IMF believes Koroma signed the ECF agreement merely to secure the first-tranche payment of $54.3 million and that the President 'lacks the political will to make requisite changes'. The cable reports that the Fund remains open to discussions with the government but insists that its requirements be implemented in full before it resumes disbursement. The cable speculates that, in such a contracted fiscal space, Koroma's government 'will likely resort to a cash-budget management system as was the case in 2007'. Indeed, this is already the case, as the government has reverted to the practice of paying salaries in cash.
Koroma's final budget projects total revenue and grants of $680 million, a significant deficit, with expenditure and net lending forecast to amount to $960 million. It estimates that the economy will grow by at least 5% this year. However, the US cable suggests that this is unrealistic and warns that if the government does not act quickly to adopt 'corrective measures' to raise revenue – 'certainly during the hoped-for honeymoon period post-election – the longer-term outlook suggests further deterioration of the national economy'.
And if the government is to receive any more IMF money it will have to implement spending cuts and subsidies removals after the election, something it told the Fund it could not risk before the election.
Courtesy: Africa Confidential 2018, https://www.africa-confidential.com